You are totally correct! However, I'd like to add that the entertainment industry people (RIAA/MPAA/etc) do not track everything you download, in fact, they can only see what you upload, and even more specifically, torrents that you seed. Even then, they would have to go through many, many torrents to find every single IP seeding their content. This is why they "bait" highly seeded torrents; they look at it, an agent from the RIAA or other agency downloads the torrent, looks at the seeders and records the IP addresses seeding that torrent. Those are the people that get the Cease & Desist letters and have their traffic monitored. They are the people that have broken the law.
I'm willing to bet that most of you saw this article and thought, "Oh goodness, my ISP is monitoring my traffic right NOW!" I'm also willing to bet that 90%, maybe even 95% of you haven't done anything wrong, and your traffic is not being monitored. Only the people that have broken the law and violated their ISP's Terms and Conditions (and have distributed infringing content) have their traffic monitored, and only after a law enforcement agency (like those tied to the RIAA/MPAA) has taken notice and notified your ISP.
Bottom line: If you don't torrent illegally, you're fine. If you don't seed your illegal torrents, you're fine. If you torrent and seed illegal content, your traffic is monitored and you get that Cease & Desist letter.